CISR18160 - The Scheme: miscellaneous: payments to insolvency practitioners

| CISR18600 | Action guide contents | |—————————————————————————————————–|———————–|

A payment is subject to the Construction Industry Scheme if it is made by

• a ‘contractor’
• to a ‘subcontractor’
• or a ‘nominee’ specified by the subcontractor or contractor
• under a ‘contract relating to construction operations’.

Certain events may occur, however, which prevent payment direct to the subcontractor, either through force of circumstance or legal requirements surrounding the event. These events include the bankruptcy of an individual subcontractor, or the liquidation or receivership of a company.

For a contract entered into by the subcontractor before insolvency, any payment made after the insolvency event may be made to a

• trustee in bankruptcy

or

• liquidator or receiver (in the case of a company).

In these circumstances payment may continue to be made on the same basis that was in place at the date of the subcontractor’s insolvency. This is because, in strict legal terms, the recipient is not ‘the subcontractor’ or a ‘nominee’ of the subcontractor or contractor, but someone acting under an ‘operation of law’.

It follows that a contractor who makes payment to an insolvency practitioner in respect ofa contract entered into prior to insolvency is

• not required to verify the insolvency practitioner
• should enter details of the payment on the monthly return.

However, contractors are advised to obtain receipts for such payments. Guidance on payments made after the appointment of the insolvency practitioner is at CISR18140.